The FDIC just announced (see here) that 60 million adults in the US are either unbanked or underbanked. With a population of about 300 million, I calculate this to be about 20% of the population – the FDIC is saying it is 25% of households in the US.
Much of the attention this article is getting is a debate regarding economic inclusion, and whether US banks are doing enough to support the unbanked and underbanked. But what I found most interesting about the results is that one of them in particular goes against a common belief regarding the unbanked.
One long held belief about the unbanked and underbanked is that they do not trust banks. The FDIC study does not s upport this belief. People were asked why they do not have a checking account. Here are the results for “do not trust banks:”
7.1% – previously had an account
6.3% – never banked
This is basically saying that <10% of the unbanked and underbanked do not have a checking account because they do not trust banks. While it does not mean that >90% do trust banks, the incidence of the unbanked and underbanked that do not trust banks is actually lower than the confidence the general population has in the banking system (see here). Trust and confidence may be two separate issues, but they are at least cousins.
The FDIC report shows that lack of trust is not a reason there are many unbanked and underbanked in an established economy like the US. Rather, it lies in their beliefs about the value a bank or financial institution can provide them.
The biggest reason most say they do not have an account is that they do not have enough money to have an account. The second biggest reason is that they do not see the value of having an account. These two reasons are really one in the same – the unbanked and underbanked need to see value in a banking relationship. So far this has mostly not been the case, and calls for a better value proposition and different set of products on the part of banks.